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Brazil annual inflation rate in mid-May seen below 4 percent
May 22, 2017 / 8:51 PM / 7 months ago

Brazil annual inflation rate in mid-May seen below 4 percent

BRASILIA (Reuters) - Brazil’s annualized inflation rate likely eased below 4 percent in the middle of May for the first time in nearly ten years, according to economists surveyed by Reuters, leaving conditions ripe for the central bank to cut interest rates at the end of this month despite growing political uncertainty.

Brazilian consumer prices likely rose just 3.74 percent in the 12 months through mid-May, the slowest pace of inflation since July 2007, according to the median forecast of 24 economists. BRIPCY=ECI

The mid-May inflation figures will be released at 9 a.m. local time (1200 GMT) on Tuesday by the national statistics agency IBGE.

Prices are expected to show a rise of 0.21 percent from mid-April, the same monthly inflation rate as in the previous reading, according to the median of 26 forecasts.

Inflation has stalled after hitting a 12-year peak of 10.7 percent in January 2016 as the worst recession in Brazil’s history caused widespread unemployment and weak consumer demand.

Consumer price inflation is now below the government’s target of 4.5 percent for the first time since 2010.

As inflation eases, the central bank is widely expected to cut the key Selic interest rate from its current 11.25 percent, even as a major corruption scandal last week put President Michel Temer’s administration on the verge of collapse.

The central bank in April slashed rates by 100 basis points, the deepest rate cut in nearly eight years and the fifth meeting in a row to produce a reduction. Rate cuts are seen as fundamental for the economy to crawl out of recession this year.

“On the one hand, political uncertainty could weaken the currency. But on the other hand, it should weigh on economic activity,” wrote Carlos Kawall, chief economist at J. Safra.

Reporting by Silvio Cascione, editing by G Crosse

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